Japan's Kaieda ahead in PM race but run-off likely

TOKYO (Reuters) - Trade minister Banri Kaieda has the lead in a ruling party race to pick Japan's next prime minister, but with chances dim for winning a majority in a first round vote, a bruising run-off looks likely, media surveys showed Sunday.

The race to select Japan's sixth leader in five years has become a battle between allies and critics of party powerbroker Ichiro Ozawa, a 69-year-old political mastermind who heads the ruling Democratic Party of Japan's (DPJ) biggest group despite facing trial on charges of misreporting political donations.

Japan's next leader, to be selected in a DPJ election on Monday, faces huge challenges including a resurgent yen that threatens exports, forging a new energy policy while ending the worst nuclear crisis since Chernobyl, and finding funds to rebuild from a devastating March tsunami as well as to pay for the ballooning social welfare costs of a fast-aging society.

Despite differences over policies such as whether to raise taxes to pay for rebuilding and how to win opposition help in a divided parliament, none of the five candidates has presented a bold, detailed vision of how to end Japan's decades of stagnation and revitalise the world's third-biggest economy.

That has raised concerns that whoever wins will end up being another short-lived leader.

The 62-year-old Kaieda, who has secured powerbroker Ozawa's backing, had support from about 115 of the 398 Democratic lawmakers eligible to vote in Monday's party election, a survey by the Mainichi newspaper showed.

Former foreign minister Seiji Maehara, 49, who says beating deflation is a top priority, was jostling with fiscal hawk Finance Minister Yoshihiko Noda, 54, and little-known farm minister Michihiko Kano, 69, for second place, the Mainichi and other Japanese newspapers said. A fifth candidate, former transport minister Sumio Mabuchi, 51, was lagging behind.

RUN-OFF VOTE LIKELY

If no candidate wins a majority in an initial vote, a run-off will immediately be held between the two top candidates.

The winner of the DPJ election will become prime minister by virtue of the party's majority in parliament's lower house.

"In the current situation, it will be tough to win a majority in the first round vote," the Nikkei business daily quoted an Ozawa aide as saying.

Maehara, a security hawk, ranks highest of the candidates with ordinary voters, but his chances have been undercut by rivalry with Noda, who shares a similar support base inside the DPJ, as well as by concern about a donations scandal.

Maehara -- who would become Japan's youngest post-World War Two premier if he wins -- resigned as foreign minister in March after admitting he had accepted donations from a Korean resident of Japan. That would be illegal had he done so knowingly.

Saturday, he told a news conference he had received more than $7,000 in donations from four foreigners and one firm headed by a foreigner between 2005 and 2010, but had not been aware of the donations, Japanese media reported.

Whoever takes over from outgoing Prime Minister Naoto Kan, who resigned as party head Friday after months of criticism for his handling of the nuclear crisis, faces a struggle to implement policies in a divided parliament where the opposition controls the upper house and can block bills.

Maehara and Noda Sunday reiterated their calls for a "grand coalition" with the main opposition parties, but Kaieda rejected the idea, to which opposition rivals have anyway been cool. "In a democratic parliamentary system, a grand coalition is not preferable," he said in a debate on NHK public TV.

Feuds over the role of Ozawa, a one-time heavyweight in the conservative Liberal Democratic Party who bolted and helped briefly oust the long-dominant party in 1993, have rattled the Democrats since his Liberal Party merged with the DPJ in 2003.

Some credit his political skills with engineering the Democrats' leap to power in an August 2009 election. Others say his scandal-tainted image is damaging the party, which has seen its support sink among voters disillusioned with its failure to deliver on promises of bold changes in how Japan is governed.

Ozawa, who lost a tough leadership race to Kan in September 2010, cannot vote in Monday's party poll since his DPJ membership was suspended following his indictment over the funding scandal.